Saturday, March 22, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – Mar 21, 2014

In a belated effort to trim its fiscal deficit, the government raised more than Rs 8000 Crores by selling stakes in Axis Bank and several PSU units. The revised divestment target – considerably lower than the earlier planned target – has been met.

US Fed’s announcement of a further reduction of QE3 bond buying by US $10 Billion was taken more or less in stride by the Indian market. A slow down in the Chinese economy and struggling economies in several emerging markets is making India a favourite of the FIIs.

A recent study undertaken by HDFC Bank in three states (Gujarat, Maharashtra, MP) has shown that rural India is less despondent about the economy than urban India. The various measures undertaken by the UPA for rural upliftment has apparently borne some positive results. It will be interesting to see whether economic benefit turns into votes during the general election.

BSE Sensex index chart

After an upward break out from the rectangular consolidation zone two weeks back, the mild pullback on the daily closing chart pattern of Sensex has turned into another consolidation pattern - a bullish ‘falling wedge’. An upward break out from the ‘wedge’ is the likely outcome in the near term.

An upward break out from any consolidation zone – including the ‘falling wedge’ – should be accompanied by a surge in volumes. Otherwise the break out may turn out to be a ‘false’ one. All three EMAs are rising together and the index is trading above them. Bulls are regaining complete control of the chart.

Daily technical indicators are in bullish zones after correcting overbought conditions. MACD has turned down to touch its signal line at the edge of its overbought zone. ROC has crossed below its 10 day MA and moving down towards the ‘0’ line. RSI has dropped to the edge of its overbought zone. Slow stochastic has slipped below its overbought zone.

The market is providing another opportunity to add fundamentally strong stocks to your portfolio.

NSE Nifty 50 index chart

For the third straight week, the weekly bar chart pattern of Nifty touched a new lifetime high (6575) but closed slightly lower – forming a ‘reversal week’ pattern. Such a pattern can mark the end of an intermediate move, so some correction is possible. However, a change of trend is unlikely.

The week’s volume bar is much shorter due to the holiday on Monday on account of ‘Holi’. A short duration trading today (Sat. Mar 22) has not materially altered the chart pattern.

Weekly technical indicators are bullish. MACD has crossed above its signal line below its overbought zone. ROC has crossed above its 10 week MA in positive territory. RSI is just below its overbought zone. Slow stochastic has entered its overbought zone.

Nifty is trading above its two weekly EMAs and the long-term up trend line. Dips should be used to add.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices are consolidating a bit after breaking out above their respective ‘rectangle’ patterns. Both indices are in long-term bull markets and should continue to move higher. Stay invested. Or, book partial profits and use dips to add.